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Boozer
08-02-2005, 08:11 AM
General Motors' employee discount pricing incentive program (which ends Aug. 1, 2005) has not only dramatically jump-started sluggish sales at the world's number one automaker -- up 41 percent last month, according to company spokesmen -- it has prompted both Ford and DaimlerChrysler to offer similar deals to consumers.
All three major U.S. automakers have been selling vehicles at "in house" prices formerly available only to company employees. The discount varies from model to model, but is worth approximately 3-4 percent off the dealer invoice price of a new car, truck or SUV.
That can amount to a savings of several thousand dollars per vehicle off MSRP "sticker" -- and has helped GM, Ford and Chrysler to clear out the glut of inventory that had been accumulating on their dealers' lots.
But while these incentives programs have been great news for consumers, in the long run, they could spell disaster for the Big Three. Fire sale prices on new vehicles may move product, but don't necessarily enhance the bottom line -- especially when the import competition hasn't had to resort to radical price cuts to attract buyers into their showrooms.
GM reported record losses of $846 million earlier this year -- the largest single quarterly loss since 1992. And GM's overall market share has dropped to about 25.4 percent, a dramatic downturn. The value of GM shares has fallen through the floor to junk bond status -- vitiating nearly $13 billion in shareholder equity.
Ford has also taken a beating -- with overall sales falling for the past 13 consecutive months. Even the once big-selling Explorer SUV is slipping, with sales down substantially this year.
Chrysler has fared slightly better -- in part because of the success of new models like the well-received 300 sedan -- but there's no question times are tough in the Motor City.
It's an open question whether an incentives-based bump in sales in the short term -- even a very big bump -- translates into long-term red or black ink for America's Big Three.
Indeed, the most recent data shows GM still hemorrhaging badly -- posting second quarter losses of $318 million, or 56 cents per share. Total revenue at the company fell to $48.5 billion from $49.3 billion.
None of this is good news.
Consumers now have an idea about the true mark-up on GM, Ford and Chrysler vehicles -- and are not likely to be interested in paying anything close to MSRP once the employee discount programs end. In order to maintain sales momentum, GM has already announced it will lower the MSRPs of its vehicles -- a de facto extension of the current lowball pricing structure. But that necessarily means lower profits per vehicle for GM -- and Ford and Chrysler, if they follow suit.
This is a terrible catch-22 situation for the domestic Big Three. If the only way they can lure buyers into showrooms is by selling vehicles at a loss or at profits point so low that it doesn't cover the cost of their automotive operations it's really only a question of how long they can string things out before a crash becomes inevitable.
Like the red giant stage of a dying sun, the spectacular summer sales fireworks may just be the prelude to an ugly implosion.

BarryMac
08-02-2005, 08:21 AM
Interesting, I'm wondering this now, with the flood of new cars hitting the streets due to the "Employee Pricing", are there going to be unbeatable deals on used Cars and Trucks? I was in my local GMC Dealership a couple of weeks back and they had used 2500HD's with 80K miles on them selling for nearly as much as you could drive out of the dealership with a brand new one. Are these Dealerships going to get stuck with an assload of used vehicles that they can't get rid of if they want too???

Ziggy
08-02-2005, 11:55 AM
Interesting, I'm wondering this now, with the flood of new cars hitting the streets due to the "Employee Pricing", are there going to be unbeatable deals on used Cars and Trucks? I was in my local GMC Dealership a couple of weeks back and they had used 2500HD's with 80K miles on them selling for nearly as much as you could drive out of the dealership with a brand new one. Are these Dealerships going to get stuck with an assload of used vehicles that they can't get rid of if they want too???
It deminished trade values signifcantly, has an effect on used car sales privately and can hurt residual values for leases.

ADDICTED
08-02-2005, 12:06 PM
So this employee discount ends today? Then would why would anyone want to purchase a new car until next time around when they can get this pricing again? It seems that they might have a bigger drop in sales?

BarryMac
08-02-2005, 12:09 PM
It deminished trade values signifcantly, has an effect on used car sales privately and can hurt residual values for leases.
Hell, I may find that used Duramax at a decent price then, the prices that they were asking a few weeks ago for used was ridiculous... :notam:

riverracerx
08-02-2005, 12:13 PM
I think GM is going to run the space program and the govenment is going to take over the auto business. :confused:

SummitKarl
08-02-2005, 01:10 PM
and just how often do you replace those cars and trucks.
thats right you will need another new one someday, especially those GM products :D (sorry couldn't resist)
I would rather sell 100 units at a $1 profit then 1 unit at a $100 profit.
it costs less to make volume, and employes many more. that means more work for the employees =overtime and more money in the economy (that the employees spend) "hopefully at victoria secret" :D rather than big fat salary and bonus to a corp exec (that might buy 1 big house or yacht) maybe if corp greed was not so rampent in the Major players, they wouldn't require a 40% mark up in the first place.
just my thoughts on it.

Ziggy
08-02-2005, 01:27 PM
A majority of the sales were for overstock of inventory that was already built Karl, not new orders. It was more of a clearing house deal.

SummitKarl
08-02-2005, 01:44 PM
A majority of the sales were for overstock of inventory that was already built Karl, not new orders. It was more of a clearing house deal.
REALLY!!!!!!!!!check stock market for the last month for GM and Ford(I just did)HUMMMM!!!!! aren't quarlty earnings due out soon :idea:
but yes I certiantly can belive the overstock deal as well, slow sales for a while. and a briliant marketing ploy as well.
so maybe I should try Employee pricing on homes, wish I could but there isn't a 40% markup to start with

Cole Trickle
08-02-2005, 01:46 PM
The used car values will suffer for a couple months and then balance out again.
Toyota,Honda and Nissan sell to an entire different brand of buyers.My guess is that your average Toyota/Nissan/Honda buyer purchases a new veicle every 5-10 years while GM,Ford and Dodge owners choose to upgrade every 2-5 years.
Why?
Most of the people I know that buy Japanese based cars are very conservative and are looking for reliable/safe and a car that will get them from point A to point B.They are probablly more worried about gas mileage then they are about quarter mile times or towing capacity.(Toyota and Honda know this and thats why they hold strong to there pricing guidelines and sway from offering incentives)
GM,Ford and DC know they are going to have a real hard time swaying these people away from there Accords and Camry's.I would bet that these two cars easily have the largest return customer base.
The only way for the big 3 (Getting smaller 3) to sell a product is to generate these special deals and compete against eachother in the same market place.
Brand loyalty is a thing of the past for american based companies.

Cole Trickle
08-03-2005, 04:02 PM
It's amazing to me that American auto manufactures use this kind of marketing system. You would never see Mercedes or Lexus discount their products like this... and I see a SHIT load of NEW Mercedes on the road every day!!!
People will pay a higher price for a product that they really want. It happens all the time... LOOK AT DCB.
I'm not a kool aid owner but Dave has been extremely successful with his marketing strategy.
Sadly only a select few can afford DCB's and Ferrari's
Supply and demand is the key.
Ferrari makes one less car than they could sell in a year to keep the demand high.
DCB's are sweet but I would have to win the lottery to justify spending 150K on a 26ft boat when there are so many other out there for 50K less.(This shows why I am a Corvette owner and not a ferrari owner)

TANGO424
08-03-2005, 04:06 PM
SAAB has gotten into the eemployee discount sales to the general public as well i dont think its just a big three issue

Cole Trickle
08-03-2005, 04:13 PM
SAAB has gotten into the eemployee discount sales to the general public as well i dont think its just a big three issue
I think Saab is owned by GM

MOBrien
08-03-2005, 04:15 PM
Uhhhh, SAAB is a GM product these days isn't it? :hammerhea

MOBrien
08-03-2005, 04:16 PM
I think Saab is owned by GM
damn it....you got me CT. :rollside:

Nord
08-03-2005, 04:41 PM
I took advantage of the chevy discount, I sold my tahoe in 30 minutes literally!!
I drove it to a local dirt lot on a busy street, put a for sale sign on it, and boom!!!! Full price!!!
However......used car sales are very very bad right now!!
You never want to trade in a car cuz they kill you on the price, but right now....They are offering extremely low prices on trade in's because they don't want them!

Stealth Marine
08-04-2005, 08:02 AM
The deal was too good for me to pass up as well.
Bought a new F-250 last week.
But in TYPICAL Havasu fashion I had to go to Needles to buy a truck that was dealer transfered in from Havasu to get the best possible price on it, because the people in Havasu wouldn't make the deal.

dicudmore
08-04-2005, 08:27 AM
The deal was too good for me to pass up as well.
Bought a new F-250 last week.
But in TYPICAL Havasu fashion I had to go to Needles to buy a truck that was dealer transfered in from Havasu to get the best possible price on it, because the people in Havasu wouldn't make the deal.
glad to hear you got your truck Chris...